Iphone Marketing Strategy Final

1 Apple iPhone
IIM Kozhikode Page 1

2 Apple iPhone
Contents
The Company and CEO.............................................................................................................3
Apple iPhone
Steve Jobs: The CEO..............................................................................................................3
iPhone Features..........................................................................................................................4
Tech Specifications................................................................................................................5
Competition Analysis.................................................................................................................6
Nokia......................................................................................................................................6
N97......................................................................................................................................6
E72......................................................................................................................................6
Blackberry..............................................................................................................................6
Marketing Strategy.....................................................................................................................7
Market Skimming Strategy.....................................................................................................8
Reasons for High Price for iPhone in India............................................................................8
Sales in India........................................................................................................................10
Market Survey..........................................................................................................................10
Market Survey Results.............................................................................................................13
Analysis of Apple iPhone Pricing Stratgey..............................................................................24
Problem Statement................................................................................................................24
Problem Analysis..................................................................................................................24
Situational Analysis..............................................................................................................24
Alternatives Strategies/ Options...........................................................................................25

3 Apple iPhone
Evaluation of Options...........................................................................................................25
Recommendations................................................................................................................26
Contingency Plan..................................................................................................................26
Conclusions..........................................................................................................................27
The Company and the CEO:
Apple Inc. is an American multinational corporation that designs and

markets consumer electronics, computer software, and personal computers. Apple
software includes the Mac OS X operating system; the iTunes media browser.
As of August 2010, the company operates 301 retail stores in ten countries, and
an online store from where hardware and software products can be sold. Established on
April 1, 1976 in Cupertino, California, and incorporated on 3rd January, 1977, the
company was previously named Apple Computer, Inc., for the first 30 years and on 9 th
January it removed the word computer to reflect the company's ongoing expansion into
the consumer electronics market in addition to its traditional focus on personal
computers.
For reasons as various as its philosophy of comprehensive aesthetic design to
its distinctive advertising campaigns, Apple has established a unique reputation in the
consumer electronics industry. This includes a customer base that is devoted to the
company and its brand, particularly in the United States. The Company has also
received widespread criticism for its contractors' labor, environmental, and business
practices.
Steve Jobs: The CEO
Steve Jobs is the co-founder and CEO of Apple and formerly Pixar.Steve Jobs

regularly makes most rosters of the rich and powerful. The reasons why he is on all
power lists are; Apple, Next, iPod and Pixar.
“Innovation distinguishes between a leader and a
follower.” -Steve Jobs
In 1976, Jobs, then 21, and Steve Wozniak,
26, founded Apple Computer Co. in the Jobs family
garage. By 1980, Apple had already released three
improved versions of the personal computer.
A tiff with the Apple board led to the
resignation of Steve Jobs. As soon as he resigned he
immersed himself in his brand new venture. The

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company was called NeXTStep and the new machine was called NeXT Computer.
Later,Jobs accepted the offer that Apple made him.
Steve Jobs also started Pixar Inc., which has gone on to produce great animated
movies. This venture has made him one of the most sought after men in Hollywood.
Post Pixar, Steve Jobs wanted another round of revolutionizing to do. This time it
was the music industry. He introduced the iPod in 2003. Later he came up with iTunes,
which was a digital jukebox. A million and a half iPods later, the music industry still
does not know whether this invention will save it or destroy it.
Later he introduced iPhone revolutionizing the way phones are used to connect
people which were the biggest move at Macworld 2007. iPhone was arguably the
ultimate Apple product. Its beautiful hardware ran no less than Apple’s full operating
system, OS X. Its multi-touch technology, Web surfing and iPod capabilities, easy-to-use
interface, and more, made it a smart phone “light-years ahead of its competition”, as he
stated.
iPhone Features:
Multitasking: One can run your favorite third-party apps — and switch between them
instantly — without slowing down the performance of the foreground app or draining the
battery unnecessarily. So you can listen to a ball game while emailing. Or can receive a
VoIP call while playing a game.
\
Folders: Drag and drop to organize apps into folders on your Home screens and get fast
access to your favorites.
iBook: More than a full-color ebook reader, iBooks is also an amazing place to browse
and shop for books anytime you feel like it.2 It works with PDFs that you can sync using

5 Apple iPhone
iTunes on your Mac or PC. And you can customize iBooks to suit the way you read —
adjust the brightness, change the text size, and more.
iPhone: On iPhone, making a call is as simple as tapping a name or number. And Visual
Voicemail lets you play messages in any order — just like email.
iPhone Tech Specifications:

Cellular and wireless
 UMTS/HSDPA (850, 1900, 2100 MHz)

 GSM/EDGE (850, 900, 1800, 1900 MHz)
 802.11b/g Wi-Fi
 Bluetooth 2.1 + EDR wireless technology
Location
 Assisted GPS
 Digital compass
 Wi-Fi
 Cellular
Power and battery2
 Built-in rechargeable lithium-ion battery
 Charging via USB to computer system or power adapter
 Talk time:
Up to 5 hours on 3G
Up to 12 hours on 2G
 Standby time: Up to 300 hours
 Internet use:
Up to 5 hours on 3G
Up to 9 hours on Wi-Fi
 Video playback: Up to 10 hours
 Audio playback: Up to 30 hours
Display
 3.5-inch (diagonal) widescreen Multi-Touch display

 480-by-320-pixel resolution at 163 ppi
 Fingerprint-resistant oleo phobic coating
 Support for display of multiple languages and characters simultaneously

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Camera, photos, and video
 Video recording, VGA up to 30 frames per second with audio

 3-megapixel still camera
 Tap to focus
 Photo and video geotagging
Capacity3
 8GB flash drive
 16GB flash drive
Competition Analysis
The major competition to Apple iPhones in India is posed by Nokia Smartphones,

Blackberry phones and Google Android to some extent.
Nokia:
Nokia Corporation is a multinational communications corporation that is

headquartered in Finland. Nokia is engaged in the manufacturing of mobile devices and
in converging Internet and communications industries, with over 123,000 employees in
120 countries, sales in more than 150 countries. It is the world's largest manufacturer of
telephones. The latest venture of Nokia is into release of N-series &E-series phones.
N97:
Nokia N97 is a touch screen mobile phone in the Nseries of "smartphones"
by Nokia, with a fold-out QWERTY keyboard. The average current market price is Rs.
22500 which is $462.96 approximately. This is touted as an iphone 3G competitor. It’s
aimed at internet savvy users and sports a full keyboard in addition to touch screen. It’s
rich in multimedia and connectivity features.
E72:
The Nokia E72 is a smart phone from the Nokia Eseries range. The Nokia
E72 is an enterprise-based smart phone (as it is a Nokia Eseries device) and has standard
features including mobile email, calendar and instant messaging amongst many others.
Blackberry:
BlackBerry is a line of mobile e-mail and smart phone devices developed and
designed by Canadian company Research In Motion (RIM) since 1996. BlackBerry
commands a 20.8% share of worldwide smart phone sales, making it the second most
popular platform after Nokia's Symbian OS
BlackBerry functions as a personal digital assistant with address book, calendar

and to-do list capabilities. It also functions as a portable media player with support for
music and video playback and camera picture and video capabilities. BlackBerry is

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primarily known for its ability to send and receive (push) Internet e-mail wherever
mobile network service coverage is present, or through Wi-Fi connectivity. BlackBerry is
mainly a messaging phone with the largest array of messaging features in a smart phone
today. This includes auto-text, auto-correct, text prediction, support for many languages,
keyboard shortcuts, text emoticons, push email, push Facebook and MySpace
notifications, push EBay notifications, push instant messaging with BlackBerry
Messenger, Google Messenger, ICQ, Windows Live Messenger and Yahoo Messenger
Marketing Strategy
The iPhone is usually launched in midnight launched very successfully in

midnight launches everywhere in the world. It has been a huge success in most markets
and this has resulted in people queuing up in front of these retail outlets at midnight to get
their hands on the latest product from Apple. Apple tried to implement the same launch
strategy in India with little success.
iPhone was launched in India on August 22,2008 in a midnight launch across all
retail shops of Airtel. But it did not have much success. Most of the retail outlets which
Airtel had tied up with realized that they did not have the permission to be open at
midnight. Others only attracted a small number of curious customers. But missing were
the lines and fanfare that accompanied the iPhone's launch in the U.S. and some other
parts of the world.
The primary thing to remember is that the launch was not conducted by Apple. It
was done by 2 service providers Apple had entered into a contract with in India namely
Airtel and Vodafone. Apple let the service providers decide the whole strategy for the
launch. As an analyst noted down, it was a case of near abdication of ownership of the
brand in the Indian market. Apple believed that the service providers would be able to
help it attain the required sales courtesy of their mega reach in the country.
Let’s look at the marketing mix employed by Apple iPhone for its launch.
1. Product – Apple iPhone which was launched in India on August 22,2008 was a
phone with great features and which had been a great success in many markets
around the world. It had some of the best features of smart phones and its touch
screen was considered the best in the category. The vast number of application in
iStore was also a great incentive to make people buy the iPhone. The same
product had taken the US market by storm when it was launched there. So it is
difficult to find fault in the product. One of the major differences between the
Indian and US market could have been that 3G facility was not available in India.
This would have reduced the utility of Iphone3G in Indian market.
2. Price – The pricing strategy for iPhone in India was vastly different from the
other markets. The service providers here were not willing to subsidize the price
of the phone in return for long contracts. The phones were sold at a price of Rs

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31,000($710) for the 8GB version and Rs 36,100($825) for the 16GB version.
This was much higher when it was compared to the price in the US and other
markets. The corresponding figures in the US and UK markets are $199 and $299.
This could have been a reason for the iPhone not being a huge success in India.
Most analysts are of the view that for the iPhone to be a success in India there is
need for price correction.
3. Place – The iPhone was launched in 8 cities in India simultaneously. Apple did
not use its channels directly for the distribution of iPhone in India. Distribution of
iPhone in India was handled by the 2 service providers Apple had a tie-up with in
India. Vodafone and Airtel sold iPhones through their retail outlets. They were
not made available through other mega mobile stores like Mobile store and the
like. Apple iPhones in India were sold only through Airtel and Vodafone retail
stores.
4. Promotion – There was a complete lack of major advertisement for the launch of
the iPhone in India. Newspapers reported the coming launch based on statements
from Vodafone and Airtel. The local Apple office in Bangalore which is merely a
sales and distribution set up, was "not authorized" to make any statements. .
"We're a product-focused company," says Malini Mitra, a Singapore-based Apple
spokesperson. "We don't comment on pricing strategy, market outlook, country
strategy, etc. We work closely with our partners Bharti Airtel and Vodafone on
the marketing campaigns across India."
Market Skimming Strategy
Analysts are also inclined to believe that Apple may have a smarter strategy for its
Indian iPhone launch than is immediately apparent. Comparison of the iPhone's U.S.
launch to the India launch gives a beautiful example of the distinction between a
penetration strategy and a skim strategy. In the U.S., Apple basically wanted to bust the
market open all at once. So, they had all these people lined up all around the block, and
when they flipped the switch -- boom! --the market existed. In India, it's almost like they
are doing a test market."
Apple's India strategy allows for much more flexibility. It lets the company learn
about the market in a much cheaper, lower-risk way. Apple could use that extra cushion
to understand how its early users react to the product and its features, evaluate its
distribution strategy and even reassess which service providers it should work with.
A skim strategy is a great way of testing the waters so that you can change course,
whereas with a penetration launch, whatever tactics you committed to, you're stuck with
-- you can't change them. This way, they can change the price, change the messaging and
broaden out to the larger market in a few years. There are several risks associated with a
product like the iPhone that is "radically different" from others in the market. There is
social risk [with people wondering] 'What kind of phone is that?' as well as functional
risk.
Apple doesn't have a large installed base of Macintosh users in India, and that
may also have persuaded it against a penetration launch for the iPhone according to

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analysts. Lack of a large significant base could have been a reason for the skim strategy
in India where Apple could not create the market in a single day.
Reasons for high price for iPhone in India
Unlike in the U.S. and other countries, the service providers are not subsidizing
the handset. In the U.S., AT&T recovers the subsidy amount from subscribers during a
contract "lock-in" period. The ARPU (average revenue per user) for AT&T is $50 plus.
In India, Airtel has an ARPU of Rs. 357 ($8.16) and Vodafone's is Rs. 350 ($7.99). These
numbers don't allow the luxury of subsidies. The Indian cellular industry could never
afford deep phone subsidies due to low ARPU values present.
Analyst are of the opinion that U.S. carriers are able to subsidize the cost of a
mobile phone device not just because of contractual lock in periods but also because "the
phone [itself] is locked so you can only use it with a specific carrier." These practices
allow U.S. carriers to recover their relatively high subscriber acquisition costs over the
period of the contract. But in India, the majority of consumers uses prepaid cards and can
easily switch carriers. The economics are not conducive to subsidizing the phone.
It's not just the low ARPUs which work against possible cross-subsidization.
India's open network/open application cell phone industry is [incompatible with] Apple's
strategy in the U.S., where it offers exclusivity to AT&T. Lock-in is anathema for Indian
consumers and, consequently, the purchase of the phone has never been linked to the
purchase of the service.
The one reason why customers tend to stick with their service provider is that
there is, as yet, no number portability in India; if you change carriers, you will have to
change your mobile number, too. The government has approved number portability,
though it will take some time to implement. When portability arrives, observers expect
large-scale migration by disenchanted users; some estimate that it will be as high as 20%.
Locking in customers through other routes -- such as Apple's strategy in the U.S. -- will
thus become more important.
AT&T reports that in the U.S., users of 3G (third generation) instruments such as
the latest iPhone typically have ARPUs double those who use 2G devices. That won't
help in India, because the country doesn't have a 3G network yet. The iPhone 3G
currently utilizes the EDGE network available in India but EDGE (Enhanced Data rates
for GSM Evolution) is technologically a poor cousin of 3G, used in countries that haven't
yet made the transition. Lack of 3G network in India could also be a reason for the lack
of sales of iPhone in India.
India's department of telecommunications has begun the process of auctioning 3G
spectrum and that it is significantly larger than in many other countries. That could result
in several carriers offering 3G services and price competition among them -- and an
advantage for Apple, he says. While such price competition is problematic for the
carriers, it is good news for Apple because it makes 3G more affordable to the consumer.
By being the pioneer in offering a 3G phone, Apple may even have a head-start in the 3G
market.
The absence of a 3G network in India could be a reason why Apple seems to be
targeting a very narrow segment of the market -- one that uses the iPhone more as a status
symbol. Besides that, the superior design and ease of use of Apple's products will bring in

10 Apple iPhone
customers. While a large majority of Indian consumers is price sensitive, there is a

segment that is willing to pay for quality.
Some analysts believe that the lack of a 3G network in India will not be a real
issue. People are not buying [an iPhone] necessarily for its functional reasons; they are
buying it to be seen at the club with it. Apple’s biggest failure lay not in pricing the
product steeply but in not having communicated the reasons for the difference in pricing
in India and other markets. Most consumers thought they were being short-changed and
they also hoped the prices will crash and come down to (the) $199 level eventually.
Sales in India
Selling huge numbers in India was not even Apple’s game plan, it seems. Around
the time of its launch, the company had said it hoped to sell 10 million units globally by
December, whereas in India, it would ship 100,000 phones by December 2009. Clearly,
Apple wasn’t expecting big sales from the market. Yet, what is surprising is that the
company didn’t even manage to achieve this target. While Apple’s spokesperson in
Singapore, Malini Mitra, refused to share any numbers, several people who track handset
sales in the Indian market said the company had imported around 50,000 phones at the
time of the launch but had only managed to sell around 11,000 units so far.
Market Survey:
Questionnaires and Reasons:
S. No. Question Reason for Asking the question

1 Age This question was asked to find the target age group for
iphone
2 Occupation This question is basically to differentiate if iphone is
more preferred by students or working class
3 Yearly CTC This question was asked to derive to derive at the
affordability of the consumer with regarding to its
income status
4 Current Location This question was asked for arriving at a potential
geographical market
5 Preferred Telecom This question was asked with reference to the strategy if
Operator iphone can be sold with contract base with any telecom
operator. This question will also help us to determine the
preferred telecom operator out of many options
6 Monthly bill Payment (in This question was asked if contract is possible with any
Rs) telecom operator then what kind of consumers can be
targeted according to their monthly usage. So that the
deal can be lucrative for telecom operators too.
7 Cost of current Handset This question was asked to know the price of current

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hand set owned and hence affordability of customers

under survey
8 Awareness of iPhone This question was asked to know about the awareness of
the ipone in the target market
9 First thing that comes to This question was asked to gather the kind of brand
your mind when you think image and values consumers have in their mind of apple
of iphone? iphone and how they look at it. This will help in finding
out if product needs to change its brand image to suit
consumer associability
10 Main Source of This question was asked in case if awareness is low what
information for apple kind of marketing channels need to explored
iphone?
11 Own iPhone ? This question was asked to know the percentage of
consumers currently owning iphone from the sample
size
12 Want to buy apple iphone? This question was asked to know consumers’ willingness
to buy the product which can be associated with income
level and awareness
13 Maximum Price willing to This question was asked to know the willingness of
pay for iphone consumers to pay for the product. This was also taken in
consideration that consumers will prefer the lowest
price, so not very low options were given
14 Rate handsets acc to This question was asked to know how much apple
preferences iphone is successful in comparison to its competitors in
developing want in consumer’s mind
15 Features preferences of This question was asked to know the preferences of
phones consumers while buying process which also constitute of
price
16 EMI payment mode for This question was asked to know the willingness of
iphone consumer to enter into EMI
17 50% subsidy for phone for This question was asked to know the willingness of
contract with any telecom consumer to enter in a two year contract with any
operator of two years telecom operator
Questionnaires in accordance with 4Ps:
Questions Framework Relation to 4 Ps for Future Analysis

Question
number Questions Product Price Place Promotion
1 Age

12 Apple iPhone
2 Occupation
3 Yearly CTC
4 Current Location
5 Preferred Telecom Operator
6 Monthly bill Payment (in Rs)
7 Cost of current Handset
8 Awareness of iPhone
First thing that comes to your
9 mind when you think of iphone?
Main Source of information for
10 apple iphone?
11 Own iPhone ?
12 Want to buy apple iphone?
Maximum Price willing to pay
13 for iphone
Rate handsets according to
14 preferences
15 Features preferences of phones
16 EMI payment mode for iphone
50% subsidy for phone for
contract with any telecom
17 operator of two years
Questionnaires in accordance with 5Cs:
Questions Framework Relation to 5 Cs for Future Analysis

Question Collaborato
number Questions Company Customer Competitors r Context
1 Age
2 Occupation
3 Yearly CTC
4 Current Location
Preferred
5 Telecom Operator
Monthly bill
6 Payment (in Rs)
Cost of current
7 Handset
Awareness of
8 iPhone
First thing that
9

13 Apple iPhone
comes to your
mind when you
think of iphone?
Main Source of
information for
10 apple iphone?
11 Own iPhone ?
Want to buy apple
12 iphone?
Maximum Price
willing to pay for
13 iphone
Rate handsets
according to
14 preferences
Features
preferences of
15 phones
EMI payment
16 mode for iphone
50% subsidy for
phone for contract
with any telecom
operator of two
17 years
Market Survey Results:
The market survey was done for a sample size of 152 which constituted of 53% students
and 47% working class group. Following are the results of market survey done according
to the questions asked. The whole survey is attached at the end.

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Profile of Survey
47%
Student
53% Working
Fig 1. Profile of survey
Preferred Telecom Operator

27%
Airtel
47% BSNL
Idea
Others
Reliance
Tata
Vodafone
9%
5%
4% 5%
3%
Fig 2. Preferred telecom operator
The preference telecom operator showed similar results across students and working
which constituted of different telecom operators like Airtel, BSNL, Idea, Reliance, Tata,
Vodafone and others is shown in Fig 2. Airtel and Vodafone are the most preferred
telecom operators by consumers with Vodafone constituting 47% of the preference list.

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Student Monthly Bill

4% 12%
36%
1000-3000
500-1000
less than 500
More than 3000
48%
Fig 3. Student monthly bill
The monthly bill of student’s community ranges from Rs500-1000 and 36% of the usage
is below Rs 500.
Working Group Monthly Bill
6% 30%
24%
1000-3000
500-1000
less than 500
More than 3000
41%
Fig 4. Working group monthly bill
For 70% of working professionals the monthly bill ranges from Rs 500-3000 and only
24% of them have monthly bill less than Rs 500.

16 Apple iPhone
Monthly Bill
20%
5%
30%
1000-3000
500-1000
less than 500
More than 3000
45%
Fig 5. Monthly bill
The monthly phone bill of 45% of the people is in the range Rs 500~1000 and 30% of
them pay less than Rs 500.
Association with iphone

28% 9% 11%
Business phone
Music
Style
Touchpad
51%
Fig 6. Association with phone
Maximum number of consumers that is 52% associate apple iphone with the style
quotient, whereas 28% consider iphone as a business phone.

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Awareness Medium
3%
7% 32%
2%
Friends
Internet
Newspapers
Others
TV
55%
Fig 7. Awareness medium
Internet is the preferred medium through which people get to know about phone and the
awareness of the iPhone also spread through friends circle (word of mouth).
Willing to pay for iphone(Rs)

4% 3%
17%
15000-20000
20000-30000
30000-40000
More than 40000
76%
Fig 8. Willing to pay for iPhone (Rs)
The survey shows76% of the people are willing to payRs 15000-20000 and only 4% are
willing to pay Rs 40000 and above.

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Student's Preference of Phones

17% 24%
Apple Iphone
Nokia E72
Blackberry
20% Google Android
Nokia N97
18%
22%
Fig 9. Student’s preference of phones
Working Group's Preference of Phones

17% 24%
Apple Iphone
Nokia E72
Blackberry
21% Google Android
Nokia N97
18%
21%
Fig 10. Working group’s preference of phones

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Preferences of Phones
17% 24%
Apple Iphone
Nokia E72
Blackberry
20% Google Android
Nokia N97
18%
21%
Fig 11. Preferences of phones
Combining the data of Fig 9 and Fig 10 it is evident that 24% of the people prefer Apple
iPhone over Blackberry (21%) followed by Google android powered phones (20%),
Nokia E72 (18%) and Nokia (17%).
Student's Preference of Features for Buying Phones

18% 20%
Price
Touch Screen
Music
18% 15% Camera
Applications
Internet
15% 16%

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Fig12. Student’s preference of features for buying phones
Working Group's Preference of Features for Buying

Phones
18% 20%
Price
Touch Screen
Music
Camera
18% Applications
15%
Internet
14% 15%
Fig13. Worker group’s preference of features for buying phones
Preference of Features for Buying Phones

18% 20%
Price
Touch Screen
Music
18% Camera
15%
Applications
Internet
14% 16%
Fig 14. Preference of features for buying phones
The survey shows that students community buys mobile phones based its utility. Here the
price plays a major role (20%) as the users are price sensitive. Internet is most preferred

21 Apple iPhone
feature in buying the phone followed by application like games, software’s etc. Touch
screen, camera and music are also some of the features preferred in buying a cell phone.
Buying Preference of iphone
18% 5%
No EMI, one time payment

Rs 14000 for 3 months
Rs 3700 for 12 months
53%
Rs.1850 for 24 months
Rs.7400 for 6 months
20%
3%
Fig 15. Buying preference of iPhone
53% of the people surveyed do NOT prefer buying iPhone using EMI option, rather they
choose one-time payment. Around 40% of the people prefer to pay by 12-24 month EMI.

22 Apple iPhone
Willingness to buy Apple iphone
38%
46%
may be
never
not now
yes
15%
Fig 16. Willingness to buy Apple iPhone
The survey results shows that majority of the people (85%) are willing to buy an iPhone.
Income and Willingness to Buy Apple iphone

40
35
more than 8 L Income
30 6-8 L Income
4-6 L Income
25
2-4 L Income
20 Less than 2 L Income
Student
15
10
0
Yes May Be Not Now Never
Fig 17. Income and willingness to buy Apple iPhone
The high income group i.e.; people with income more than 8 lac are willing to buy the
iPhone.
Income Level and Preference of EMI

Yearly No Rs Rs Rs.1850 Rs.7400 Grand
CTC EMI, 14000 3700 for 24 for 6 Total

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(Lakh
onetime for 3 for 12
per months months
payment months months
annum)
Student 38 1 18 10 3 70
Less
than 2 L 3 1 1 2 2 9
Income
2-4 L
4 2 6 1 13
Income
4-6 L
10 4 6 2 22
Income
6-8 L
7 1 3 3 14
Income
more
than 8 L 19 1 3 1 24
Income
Grand
81 4 31 28 8 152
Total
Table 1. Income level and preference of EMI

Own an Apple iphone
Yearly CTC (Lakh per
No Yes Grand Total
annum)
Student 63 7 70
Less than 2 L Income 9 0 9
2-4 L Income 13 0 13
4-6 L Income 20 2 22
6-8 L Income 12 2 14
more than 8 L Income 21 3 24
Grand Total 138 14 152
Table 2. Own an Apple iPhone
Preference for Contract Based Model with any Operator

May N Ye
Monthly bill payment(in Rs) Grand Total
be o s
1000-3000 15 9 7 31
500-1000 24 15 29 68
less than 500 17 17 12 46
More than 3000 1 4 2 7
Grand Total 57 45 50 152

24 Apple iPhone
Table 3. Preference for contract based model with any operator
Cost of Handset Owned with respect to income level

Less More
Yearly CTC (Lakh per 10000- 3000- than than Grand
annum) 20000 10000 3000 20000 Total
Student 18 37 9 6 13
Less than 2 L Income 5 3 1 0 22
2-4 L Income 8 4 1 0 14
4-6 L Income 11 8 2 1 9
6-8 L Income 7 2 2 3 24
more than 8 L Income 7 10 3 4 70
Grand Total 56 64 18 14 152
Table 4. Preference for contract based model with any operator

Analysis of the Apple iPhone Pricing Strategy
Problem Statement:
To raise demand and increase the Sales Volume of Apple iPhone
Problem Analysis
1. Dismal Sales of just 4000 last quarter sets and 11000 sets since launch. What
needs to be done to promote sales.
2. What price and through what channels shall we market the iPhones to increase
sales?
Situational Analysis
Apple’s iPhone is one of the world’s most sought after handsets. New models of the
handsets are always launched at midnight. Apple prices its sets highly at launch to
capture the early adapters’ surplus. This strategy is commonly referred to as market
skimming.
Then after the passage of some duration of time the prices are slashed to make it more
affordable to other population segments. Apple in the US as well as in EU market often
enter into contracts with telecom behemoths like AT&T who offer subsidized sets to their
customers in return for a 2 year contract. This strategy seems to be working fine. The
price of an iPhone was initially $199 with subsidy. Later it was further slashed to $99.
In India Apple entered into contracts with Airtel and Vodafone. However, no contract
scheme was offered and the sets were priced as high as $799 even to this day. Though as
our survey shows most of the sample population was aware of iPhone and gives it higher

25 Apple iPhone
preference over Blackberry, Nokia etc yet Apple Sales has been dismal just 4000 in Q4 of
2009 and just 11000 sets overall since its launch in September 2008. Moreover, it had
launched a 3G phone in a 2G country. 3G spectrum has only recently being auctioned.
It is also seen that unlocked sets are often available in the grey market at US prices.
These are typically phones brought in by visitors from the US. These are unlocked in the
grey market.
Under such circumstances it seems there is something inherently wrong with either
Apple’s pricing policy or with its mechanism for distribution. Also Customer support is
poor in some cases, we had called up some Apple dealers in Bangalore. They were very
unclear as to the nature of technology used viz. CDMA or GSM and also whether the
phones were 3G or 4G enabled.
Also the practice of mid-night launch was not effective in India as most outlets did not
have permission to be open at midnight. Even where some outlets were open it failed to
draw large crowds, drawing only some curious onlookers.
Thus it is felt an introspection of the current strategy in India is needed.
Alternative Strategies/Options
Option 1: Continue with current prices. Offer contract with telecom operators like
Vodafone and Airtel like that in the US to subsidize the price to be borne by the user for
the handset. Contract system had worked with Reliance India Mobile when they launched
a Dhirubhai Ambani Pioneer Plan Offer which stipulated a contract for 3 years.
Option 2: Reduce the price to Rs 25000 for the set (16 GB) similar price cut for the other
models. This will still retain premium pricing feature of Apple and yet make it more
affordable. Also allow for flexi-payments like that of those proposed installment schemes
of our Market Survey.
Option 3: Reduce prices to as low as Rs 17500. This price level makes the phone
affordable to a wider range of audience. It is expected to increase sales volume. Also
other than direct payment we will have flexi-payments like that of those proposed
installment schemes of our Market Survey.
Option 4: Reduce price to Rs 25000 for the first year, then when limited market
skimming has been achieved we slash prices further to Rs 17500, which may increase our
sales. As before options for flexi payments should also be there. Offer unlocking facilities
for nominal charges.
Evaluation of Options

26 Apple iPhone
 Option 1 offers subsidized sets in exchange for a contract. Though this scheme had
success abroad and even in India with RIM, there are a few major drawbacks.
a. Reliance had offered cheap handsets of LG and Samsung which are
anyway much cheaper than iPhone.
b. There are very few subscribers in the sample who have monthly bills in
excess of Rs 3000/-. (Refer: Calculations attached). Thus potential reach is
very limited.
The subsidy policy is not viable for our collaborators, as without high monthly usage by
Indian customers it will be extremely difficult to make profits by this strategy.
 Option 2 asks for cutting prices to Rs 25000 assuming that customers are stating less
than their reservation prices. With this strategy we have less volume growth than
option 3 but higher revenues compared to option 3 in the first year of implementation.
However, in the long term option 3 clearly produces more sales as well as revenue
growth. (Refer: Calculations).
 Option 3 asks for reducing price to that stated by the market survey. We enjoy good
revenue as well as sales growth in the long run. (Refer: Calculations attached).
However, the short run revenue i.e. first year is less than that of option 2. It has the
potential to undermine Apple as a premium brand.
 Option 4 asks for prices to be reduced to Rs 25000 in the first year and then further
cut it to Rs 17500 in subsequent years. This limited market skimming allows us to
benefit from higher revenues in year one and higher growths and revenues from Year
2 onwards. The advantage is we maintain a premium factor and then we capture
remaining consumer surplus by reducing the price to make it affordable to the price-
sensitive buyer. Offering unlocking at a nominal charge may induce us to re-capture
some market share from the grey market.
Recommendations
It is suggested to slash prices to Rs 25000 for the year 2010-11. Then in the next fiscals
we further slash prices in line with our market skimming policy to Rs 17500. It is also
suggested that besides direct payment we should also offer flexi-payment schemes. We
also offer unlocking at a nominal price. We must increase our customer support by
training our sales force about the phones features and technology.
Furthermore, our collaborators like Airtel and Vodafone can offer contracts to only to
those customers whose monthly bills are in excess of Rs 3000. This has the potential to
gross up additional revenues of close to Rs 0.5 Crores.
Rather, than handling out distribution and marketing to our collaborators, we can set up
exclusive Apple outlets as well as introduce ads in the Internet emphasizing on most
preferred features like style and touchpad. (The survey points to Internet and friends as
primary sources of information on iPhone)
There is also a possibility of launching iPhone 4 in India this year itself. We recommend
it to be priced at Rs 40000 to fill the vacuum that may be created by the price slashing.
Product if launched should be launched in more earthly hours and preferably close to

27 Apple iPhone
prominent festivals so as to encash on the relative price insensitivity of the customers

during pre-festival shopping.
Contingency Plan
We would review if the sales growths achieved within first 6 months of implementation
are in line with our expectations. If the sales/revenue growths are less than expected, we
recommend immediate slashing of prices to Rs 17500 in year 1 itself.
If on the other hand we find sales to be above expectations we may continue with Rs
25000 in subsequent quarters as long as our revenues are in excess of projections for
option 4.
Conclusions
 We will thus reduce prices to Rs 25000 in short run then further cut it to Rs
17500 in the 2nd fiscal from implementation.
 We should provide better customer support to maintain our premium image.
Current levels are not up to the mark. Also set-up Apple outlets by offering
dealerships.
 Offer flexi-payment schemes
 Offer contracts through collaborators only for high monthly users.
 Offer unlocking.
 Put up ads on the internet with emphasis on differentiating features like style
etc.
 Monitor sales and revenues post-implementation so that we may apply mid-
course corrections according to our contingency plans
 Stop the practice of midnight launches in India, Rather launch at more earthly
hours during pre-festival shopping seasons followed by publicity over the
internet. This will enable us to encash on the relative price-insensitivity of
consumers in these festive seasons.

28 Apple iPhone
Appendix A

29 Apple iPhone
References
http://www.fonearena.com/blog/18700/apple-iphone4-unlocked-prices-
revealed.html/comment-page-2
http://en.wikipedia.org/wiki/Apple_Inc.
http://www.apple.com/iphone/iphone-3gs/
http://www.crunchbase.com/person/steve-jobs
http://www.allaboutstevejobs.com/bio/bio.html
http://www.apple.com/about/
http://www.wikipedia.org/blackberry
http://www.wikipedia.org/e72
http://www.wikipedia.org/n97

30 Apple iPhone
Appendix B

31 Apple iPhone
Revenue (Option 2)
1,400,000,000
1,200,000,000
1,000,000,000
800,000,000 Revenue
600,000,000
400,000,000
200,000,000
0
2008.5 2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 2013 2013.5

32 Apple iPhone
Market Expansion (Option 2)

60000
50000
40000
Market Expansion
30000
20000
10000
0
2008.5 2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 2013 2013.5
Revenue (Option 3)
1,800,000,000
1,600,000,000
1,400,000,000
1,200,000,000
1,000,000,000 Revenue
800,000,000
600,000,000
400,000,000
200,000,000
0
2008.5 2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 2013 2013.5

33 Apple iPhone

100000
90000
80000
70000
60000
Market Expansion
50000
40000
30000
20000
10000
0
2008.5 2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 2013 2013.5
Revenue (Option 4)
1,800,000,000
1,600,000,000
1,400,000,000
1,200,000,000
1,000,000,000 Revenue
800,000,000
600,000,000
400,000,000
200,000,000
0
2008.5 2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 2013 2013.5

34 Apple iPhone

100000
90000
80000
70000
60000
Market Expansion
50000
40000
30000
20000
10000
0
2008.5 2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 2013 2013.5

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1 Apple iPhone

IIM Kozhikode Page 1

The Company and CEO.............................................................................................................3

IIM Kozhikode Page 2

The Company and the CEO:

Apple Inc. is an American multinational corporation that designs and

Steve Jobs: The CEO

Steve Jobs is the co-founder and CEO of Apple and formerly Pixar.Steve Jobs

IIM Kozhikode Page 3

IIM Kozhikode Page 4

iPhone Tech Specifications:

 UMTS/HSDPA (850, 1900, 2100 MHz)

 3.5-inch (diagonal) widescreen Multi-Touch display

IIM Kozhikode Page 5

Camera, photos, and video

 Video recording, VGA up to 30 frames per second with audio

The major competition to Apple iPhones in India is posed by Nokia Smartphones,

Nokia Corporation is a multinational communications corporation that is

BlackBerry functions as a personal digital assistant with address book, calendar

IIM Kozhikode Page 6

The iPhone is usually launched in midnight launched very successfully in

IIM Kozhikode Page 7

Market Skimming Strategy

IIM Kozhikode Page 8

Reasons for high price for iPhone in India

IIM Kozhikode Page 9

customers. While a large majority of Indian consumers is price sensitive, there is a

Questionnaires and Reasons:

S. No. Question Reason for Asking the question

IIM Kozhikode Page 10

hand set owned and hence affordability of customers

Questionnaires in accordance with 4Ps:

Questions Framework Relation to 4 Ps for Future Analysis

IIM Kozhikode Page 11

Questionnaires in accordance with 5Cs:

Questions Framework Relation to 5 Cs for Future Analysis

IIM Kozhikode Page 12

Market Survey Results:

IIM Kozhikode Page 13

Fig 1. Profile of survey

Preferred Telecom Operator

Fig 2. Preferred telecom operator

IIM Kozhikode Page 14

Student Monthly Bill

Fig 3. Student monthly bill

Working Group Monthly Bill

Fig 4. Working group monthly bill

IIM Kozhikode Page 15

Fig 5. Monthly bill

Association with iphone

Fig 6. Association with phone

IIM Kozhikode Page 16

Fig 7. Awareness medium

Willing to pay for iphone(Rs)

Fig 8. Willing to pay for iPhone (Rs)

IIM Kozhikode Page 17

Student's Preference of Phones

Fig 9. Student’s preference of phones

Working Group's Preference of Phones

Fig 10. Working group’s preference of phones

IIM Kozhikode Page 18

Fig 11. Preferences of phones

Student's Preference of Features for Buying Phones